• The US political uncertainty undermined the USD and assisted EUR/USD to gain traction on Tuesday.
  • The intraday uptick quickly ran out of the steam on reports of fresh lockdown measures in Europe.
  • Investors might refrain from placing aggressive bets ahead of the ECB policy decision on Thursday.

The EUR/USD pair failed to capitalize on its intraday positive move on Tuesday, instead met with some fresh supply near the 1.1840 region amid a late pickup in the US dollar demand. As the US presidential election draws near, the uncertainty about the actual outcome kept the USD bulls on the defensive through the major part of the European trading session and provided a minor lift to the major. It is worth reporting that the incoming polls have been indicating that Democrat candidate Joe Biden is ahead of incumbent President Donald Trump. However, investors remain wary of predicting the actual outcome as the gap is narrow in certain key swing states.

Meanwhile, growing market worries about the potential economic impact of the ever-increasing coronavirus cases, along with the lack of progress in the US stimulus talks continued weighing on investors' sentiment. This, in turn, helped limit deeper losses for the safe-haven USD, which was further supported by upbeat US Durable Goods Orders data. In fact, the headline orders rose 1.9% MoM in September, while orders excluding transportation increased by 0.8% as against consensus estimates pointing to a growth of 0.5% and 0.4%, respectively. Separately, the Conference Board's US Consumer Confidence Index fell to 100.9 for October from the previous month's downwardly revised reading of 101.3.

On the other hand, the shared currency was weighed down by reports that France could reintroduce a national lockdown to curb the second wave of COVID-19 infections. According to Reuters, Eurozone's economic powerhouse Germany also contemplates a measured lockdown as its health care system is close to breaking point. The development fueled worries that renewed lockdown measures could prove detrimental to the already fragile Eurozone economic recovery and sent the pair tumbling down to six-day lows during the Asian session on Wednesday. The downside is likely to remain limited as investors might refrain from placing aggressive bets ahead of the latest monetary policy update by the European Central Bank on Thursday.

There isn't any major market-moving economic data due for release on Wednesday, either from the Eurozone or the US. Hence, market participants will look forward to the French President Emmanuel Macron's televised address to the nation later this Wednesday. Apart from this, investors are likely to take cues from developments surrounding the coronavirus saga. Meanwhile, the broader market risk sentiment will influence the USD price dynamics and further assist traders to grab some meaningful opportunities.

Short-term technical outlook

From a technical perspective, the pair was last seen hovering near the 38.2% Fibonacci level of the 1.2011-1.1612 downfall. Some follow-through selling below the mentioned support, around the 1.1770-65 region, now seems to accelerate the fall back towards the 1.1700 mark before the pair eventually slides back to retest September monthly swing lows, around the 1.1615-10 region.

On the flip side, the 50% Fibo. level, around the 1.1815 region, now seems to act as immediate resistance. Above the mentioned hurdle, the pair is likely to make a fresh attempt to challenge the 61.8% Fibo. level, around the 1.1855-60 region. A sustained move beyond the recent swing highs, around the 1.1880 zone, will negate any near-term bearish bias and set the stage for an extension of the recent appreciating move, possibly towards reclaiming the key 1.2000 psychological mark.

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